The postings of a customs lawyer in Chicago on the state of customs law and international trade law. Important Disclaimer: None of this is legal advice, don't act on it. Don't ascribe these statements to my law firm, its partners or clients. Don't steal from my blog. I wrote it, I own it. But, feel free to link to me. Also, under the rules regulating speech by attorneys, this blog may be construed as lawyer advertising. I am the sole party responsible for the content.

Tuesday, November 28, 2006

I am treading lightly. It turns out, people read this stuff. The last time I talked about sec. 1625 and the revocation or modification of rulings or treatments, I got chewed out (with some justification). But, here we go again. This time, I freely admit I am writing this not out of a disagreement with the judgment but because I had a hard time piecing together what happened. Maybe you did too.

In Motorola, Inc. v. United States, (slip op. 06-165), the issue was whether 900 bypass entries or pre-classification rulings constitute "treatment" for purposes of 1625. If so, Customs should have engaged in the 1625 notice and comment process before issuing a ruling changing the classification in a way unfavorable to Motorola. The Court does a very thorough, well-reasoned analysis finding that bypass entries are not a treatment triggering section 1625.

The regulations (19 CFR 177.12(c)(2)(ii)) state the following:

The determination of whether the requisite treatment occurred will be made by Customs on a case-by-case basis and will involve an assessment of all relevant factors. In particular, Customs will focus on the past transactions to determine whether there was an examination of the merchandise (where applicable) by Customs or the extent to which those transactions were otherwise reviewed by Customs to determine the proper application of the Customs laws and regulations. For purposes of establishing whether the requisite treatment occurred, Customs will give diminished weight to transactions involving small quantities or values, and Customs will give no weight whatsoever to informal entries and to other entries or transactions which Customs, in the interest of commercial facilitation and accommodation, processes expeditiously and without examination or Customs officer review . . . .

The Court found that bypass entries are processed expeditiously for purposes of facilitating commerce. Consequently, the burden was on Motorola to show that real review occurred and that the exception does not apply. Unfortunately, the Court did not find Motorola's evidence of review compelling and found that bypass does not constitute treatment.

But, there was another possibility for Motorola, and this is where things got more complicated for me. The second question was whether two pre-class rulings constitute treatment. Here, the Court started with the premise that the PRLs, which it called interpretive rulings, do not constitute prior interpretive rulings or decisions for purposes of 1625(c)(1). Thus, they can only trigger notice and comment if they are treatments for purposes of 1625(c)(2).

The reason for this oddness is that the CIT previously held, and no one contested on appeal, that PRLs do not trigger 1625 notice and comment because they only apply to the same merchandise and not to other merchandise even if substantially identical. So, 1625(c)(1) was off the table and Motorola's only chance was to find a 1625(c)(2) treatment.

No such luck. The problem for the Court was that it could not (in its judgment) consider interpretive rulings as treatments under (c)(2) when there is a specific provision for them in (c)(1). That would make (c)(1) redundant, and that is against the lawyer rules for reading statutes. For proof, poke around on the sadly apparently defunct Statutory Construction blog.

Monday, November 20, 2006

I saw this story a few days ago and passed on blogging it. It came up in my automated Google Alert for CBP. Unfortunately, the first site on which I saw it reported was NSFW, if you know what I mean. Now, it is showing up in the news without illustrations.

The story is simply that CBP arrested one Timothy Boham after he was questioned at the border in Arizona. Apparently, when questioned he volunteered that he was the subject of an arrest warrant in Denver for murder. Generally, that is an answer that will lead to your arrest.

The reason the original link was NSFW is that Mr. Boham is an "actor" in gay pornography where he goes by the name Marcus Allen. Which, of course, makes me wonder whether this Marcus Allen has considered filing for trademark protection for his name.

Thursday, November 16, 2006

Apparently, it is not just Ford that has come under scrutiny from Customs and Border Protection for NAFTA certification.

Here is the text of a press release that pretty much speaks for itself:

WASHINGTON -- U.S. Customs and Border Protection in San Diego has reached a $10 million settlement with Pioneer Speakers, Inc. for violations of Nafta rules and record-keeping requirements. The settlements are in lieu of fines totaling more than $46 million that accrued against Pioneer in two unspecified years, according to a Customs press release. Customs said that Pioneer provided false claims for preferential treatment for speakers imported from Mexico. The speakers were assembled from parts made in another country, so do not qualify for Nafta duty preference. Pioneer also failed to keep proper records on the imports, Customs said.

A million here, a million there, pretty soon these penalties get to be real money.

Like so much else in this business, there has got to be an interesting story behind this case. I wish I knew what it is.

Looking to pick up a fake Rolex on your next trip overseas ? Careful. Customs is looking for you. Well, really they are looking for larger quantities, but you get the point.

Here is an article posted by the State Department on the increased international attention being paid to counterfeit merchandise. The article says that seizures have doubled since 2001. I am going to speak on this topic at John Marshall on Nov. 30. Here is the brochure.

If you are smuggling, don't assume you won't come under suspicion just because you look like a respectable, non-threatening civilian. That's probably what 60-year old Carmen Grado Franco thought. At least up until she was busted at the port with almost 200 pounds of marijuana and a bit of cocaine.

Wednesday, November 15, 2006

The USTR announced yesterday (11/14/2006) a WTO Appellate Body finding that the EU fails to administer uniformly its customs laws with respect to liquid crystal display monitors. While this might seems like a narrowly focused issue, it has broader ramifications. First, the decision reaffirms the important principle that the EU needs to have uniformity across its 25 member states. This should be true for all merchandise, not just the liquid crystal display monitors. Second, the Appellate Body also held that the original panel should have considered the broader question of EU uniformity rather than limiting it to the LCD display question.

Monday, November 13, 2006

It's odd that I feel bad when I don't post for a while. I try and post twice a week and to have at least one post on topic. When I travel, I find it harder to post and I have been on the road lately.

Last Monday, I moderated the Administrative Procedure Act panel for the CIT Judicial Conference. From where I sat, it seemed like an interesting panel. Boiled down to its core, the conclusion is that the APA has no real role in CIT cases brought under 28 USC 1581(a)-(h) because those cases are either denovo or have a standard of review set in a different statute. But, the APA is directly implicated in 1581(i) cases. How the APA applies will depend on the nature of the case and the questions of both law and fact. It is clear, however, that more than just the "arbitrary and capricious" shorthand is applicable.

From NY, I went to Miami for the ABA Section of International Law Fall Meeting. There was an excellent discussion there about "new" opportunities for judicial review at the Court of International Trade. Some of that discussion had to do with non-traditional actions that fall within the current jurisdiction of the court. The rest of the discussion had to do with possible expansions in the Court's jurisdiction.

The highlight of my week, though, was a frolic and detour. I got to indulge my fascination with crackpot theories and the paranormal by visiting the Coral Castle (don't skip the intro) in Homestead. Basically, it consists of a small compound built with very basic tools by a single 100 pound man. The place is made entirely of local coral and there are pieces that weigh as much as 30 tons. This, of course, raises the question of how he accomplished this feat including moving the stones. Some believe he had good instinctive engineering skills and built pulleys and levers to do it. Boring. The better theories involve his esoteric knowledge of magnetism. This knowledge allowed him to render the stones weightless the same way the Egyptians did to built the pyramids. Others say he used harmonics and actually sang the stones into weighing less than gravity would dictate. Another theory is that he strung wires around to induce magnetic fields to lift the stones. All of this, keep in mind, was figured out by a guy who turned a Ford differential housing into a BBQ cooker and

Honestly, I don't know how he did it.

I love this stuff. It is a great way of identifying people who did poorly in high school physics. I am also fascinated by people who think the earth is 10,000 years old and that Noah's Ark included sleeping dinosaurs. Yes, I know that sounds very condescending and judgmental.

This picture I took depicts a wall of the castle showing models of Mars, Saturn, and a crescent moon. The builder apparently believed Mars was inhabited. His decorating touches also include a table made in the shape of Florida, a throne room, and an open air bathtub. He did all this, we are lead to believe, because he was jilted in his native Lithuania.

I am sure that when the reptilian controllers of the world are exposed, they will tell us how Ed managed to build this place.

I'll be reading slip opinions this week and will catch up with a useful post soon.

Tuesday, November 07, 2006

Customs and Border Protection has announced a new program to make it easier for pre-registered recreational boaters to return to the U.S. after visiting foreign ports. The program, called the Local Boater Option is only available in select ports from Tampa to the U.S. Virgin Islands. Pre-registered arriving vessels will only need to report in via phone. Everyone else has to arrange for the normal face-to-face screening.

Seems like a good idea as long as the 2007 Terrorist Regatta is not in town.

On Monday, November 6, 2006 the previously unknown to me Association of Corporate Travel Executives issued a warning to its members about carrying laptops in international travel. The association is rightly concerned about the risks to corporations of having a laptop seized as evidence at the border and losing access to important corporate information.

I've written on this before. At that time, though, I did not think of it in terms of corporate compliance. It is an issue. If one of your managers is traveling abroad with a computer containing sensitive information, your corporate policies should prohibit that person from storing any illegal or questionable information on the computer even temporarily (Customs and Border protection can look at deleted files, Internet caches, etc.). What you are worried about here is illegal information. There is no problem with your executives having a computer chock full of pictures of their kids and pets or the latest version Grand Theft Auto. A computer with images of child pornography, the Quicken books for a terrorist cell, or recipes for Ecstasy could present a problem. If the laptop is seized, it is not likely to go back to the company anytime soon. While you may be put out because your manager is sitting in jail, that is his or her problem. On the other hand, if the PowerPoint presentation needed to pitch the hot new prospect in Dubai is seized, that could be a real problem.

Friday, November 03, 2006

Customs recently issued a ruling quite wisely stating that an electronic signature would be acceptable on a NAFTA certificate of origin. OK, fine. This is hardly newsworthy since copies of COs are acceptable.

The interesting thing here is the distinction between a run of the mill electronic signature and a digital signature. The electronic signature at issue in the ruling was a bit map graphic of a handwritten signature. For all intents and purposes, it is the digital equivalent of a rubber stamp and ink pad signature.

Don't get me wrong. I think the ruling is fine. There is no reason to require that a human being take a pen in hand and make his or her mark on the document to authenticate it. Customs correctly noted that the law has long recognized that anything placed upon a document with the intent that it signify that the person making mark agrees to the contents, is a signature. That is why illiterate people used to "make their mark" with an X on a document or why a thumb print is a perfectly good signature. The NAFTA CO is not such a unique or important document that it requires an original signature. Frankly, this day and age, it is increasingly difficult to think of any documents that should require a physical signature. I recently renewed my license to practice law completely via the internet without signing a single document. Every time you make a purchase online, you "sign" the charge receipt when you complete the transaction. The Court of International Trade has almost fully implemented the electronic filing of documents with true electronic signatures and no physical ones.

A true digital signature is a code usually consisting of many alphanumeric characters that bears a complex mathematical relationship to the contents of the document. As a result, with good electronic signature technology, it is possible to determine whether the document has changed since the original signing. The BMP facsimile signature does not do that.

Why do I point this out? Because real people in real industry want to eliminate the paper NAFTA CO entirely and let suppliers provide the relevant data via a secure web interface. The data could then be digitally signed to prove its authenticity and preserve its integrity. From there, the company could use the data in its own compliance processes without having to re-key it. If a NAFTA verification were to be necessary, the company could produce all the relevant data in a report or, if requireed to do so, run it off on paper CO forms. The only thing missing would be a physical signature or something looking like a physical signature.

In the past, I have read the regulations to require a paper CO. Given this ruling, I am not sure that is the case. With a true digital signature, the data is authenticated and secure. The name of the certifier can be printed in the signature block of a paper CO as necessary. What is missing from this system in terms of compliance? Nothing. Perhaps someone should request a ruling to confirm that a paperless CO system is acceptable.

After that, I will move on to getting rid of the official posting of liquidation notices.

Wednesday, November 01, 2006

News reports from down under (where women glow and men chunder) say the U.S. has banned the importation of the Australian culinary staple Vegemite.

This is a serious issue. One blogger at Homeland Stupidity has done a little investigative journalism and ordered a sample from Oz. It appears to have arrived without delay, leading to questions on whether there is, in fact, a ban. Aussie newspapers have quoted a Kraft spokesperson as explaining that the folate added to Vegemite is apparently only permitted in U.S. grains and cereal products.

When all else fails, I turn to Snopes, which declares this story to be false. But, the explanation clearly indicates that U.S. rules prohibit boosting folate in non-grain food products and that commercial importations would be a violation of U.S. regulations. Snopes, however, concludes that because the FDA has not asked Customs to seek out Vegemite in the possession of arriving passengers, the story is false. I think they need to parse this out a little more finely.

The story is fascinating to me because for a short period in my ill-spent youth, I lived in Australia. That period was 1980 and I attended high school there as an exchange student.During that time, I ate a number of odd foods including some crab-like thing that I think was called a beach bug. I also learned to drink beer. Mostly, I drank Fosters before it was made in Canada but also Tooth's. I hope this does not come as a shock to my parents.

I enjoyed my time in Australia. I think a major reason for that is that I never ate Vegemite. I tasted it. I tasted it several times. Each time, I realized that it is not what Americans would call "food." Rather, it is more like an ingredient. This stuff is a salty, malty, pungent yeast extract that is not dissimilar to straight soup base. Bite a bouillon cube and you'll get a decent idea of Vegemite.

But, if there is a break in the supply chain for ex-pat Aussies living in the U.S., there may be repercussions. They take this stuff pretty seriously. That means we all need to be on the lookout for bomb carrying wombats and boomerang tossing emus. And whatever you do, stay away from Nicole Kidman. She is likely to be very cranky.